Have cuts to public services gone too far?

25 January 2016

In the latest Prospect magazine, the distinguished commentator Anatole Kaletsky warns on “unsustainable cuts to core public services”. Specifically he argues that the Government should do more to increase fuel taxes and reduce spending on pensioner benefits:

“Such a rebalancing of spending and revenues – steadily increasing energy taxes and gradually reducing pensioner handouts – is a much more plausible mechanism for permanently improving Britain’s public finances than unsustainable cuts to core public services or Osborne’s gimmicky tax reforms.”

The former Times columnist is clearly right on the pensioner benefits, as Reform has argued for a number of years. It is fascinating to see the BBC (reportedly) making a similar argument on pensioner TV licenses today. A concerted campaign by the BBC against at least one pensioner benefit would be a big new factor on the political scene.

Whether “cuts to core public services” are “unsustainable”, however, is debatable. Certainly some cuts have gone too far. Cuts to social care appear now to be in danger of driving residential care and home care operators out of the market. The result would be more pressure on NHS A&E departments and a higher overall cost to the taxpayer (because private provision is cheaper than public sector provision).

Otherwise the honest answer is that it is hard to know. As the Spending Review showed, the government doesn’t have great data, or any data, on the performance of public services versus their costs. A lot of Reform’s work is investigating this productivity question at the moment.

Based on our recent work, however, my guess would be that Mr Kaletsky is overstating it. To run through the big public services:

  • NHS: The service is under financial pressure of course. But is that because cuts have gone too far, or because reform could go much further? I was really impressed by the NHS England commitment to a technological revolution in healthcare as expressed at our joint event earlier this month. Nevertheless that revolution has barely begun, with (say) 12 per cent of patients booking GP appointments online.
  • Schools: The value for money conversation has barely begun in schools.
  • Welfare: Iain Duncan Smith is right to say that successful reform can reduce costs in the long term. That isn’t an “unsustainable cut”, in fact it’s the opposite.
  • Defence: The Ministry of Defence has an admirable reform programme but one that is still bedding in.
  • Criminal justice: The police were expecting more cuts in the last Spending Review. They would have happy to receive a cut of 10 per cent in real terms over the Parliament. Prisons are becoming less safe and more violent but that could be more to do with a lack of sentencing reform (leading to overcrowding) and lack of reform of the estate.

The power of technology to change public services has been the big theme of Reform’s events programme so far this year. In the light of that, it is too big a jump to say that all public services are unsustainable at current budget levels.



Greg Wood

26 January, 2016

On welfare, IDS says "successful reform can reduce costs". Well of course it can; just as unsuccessful reform can increase costs - which is the reason why the NAO's recent report on the high costs of the DWP's disability assessments is being investigated by the Public Accounts Committee. REFORM is a small think-tank which could prosper if it is seen as analytical and accurate. If it becomes mere ideological window-dressing, it will remain a small fish in a small pool.

John Hope

25 January, 2016

Kaletsky for all his faults has this one right and you do not. When all this privatisation nonsense finally blows up in all our faces ( and it will ) we will look back and someone will do the sums and see that our public services when they were truly public were cheap as chips compared to what is being orchestrated year by year now. Take the biggest one of of all - healthcare - in the United States the administration costs of their labyrinthine system are 14% of total expenditure . Here, before any private sector involvement, they were 6%of the total NHS budget . Where then is the ' efficiency ' and ' improved ' productivity ' ? There is none it's a fiction stupid. But the propaganda will continue to be peddled by Reform and its fiction writers without the slightest regard for evidence, or scruple.